Reduction of total inventory cost of MRO inventory through the use of forecasting method and inventory model at the Luzon satellite warehouses of the Philippine Long Distance Telephone Company

Date

12-2015

Degree

Bachelor of Science in Industrial Engineering

College

College of Engineering and Agro-Industrial Technology (CEAT)

Adviser/Committee Chair

Marc Immanuel G Isip

Restrictions

Restricted: Not available to the general public. Access is available only after consultation with author/thesis adviser and only to those bound by the confidentiality agreement.

Abstract

This study was conducted at the main warehouse of the Philippines Long Distance Company in Santa Ana, Manila Philippines. The total replenishment cost associated with the MRO inventory of the company in the year 2014 is 47.49 million pesos, which is 15.77% over the budget for that operation. This is caused by the high inventory levels of the MRO inventory in the satellite warehouse. The high inventory level of MRO inventory are caused by the following experimental factors: 1) lack of method with a strong mathematical basis for determining future demand, 2) lack of proper methods for the computation of the optimal order quantity and reorder points, 3) lack of efficient trucking scheme. For the replenishment scheme to be optimized, it was necessary to revert back to the previous delivery scheme of the company that utilizes milk runs. This resulted to the relocation of inventory to a single main warehouse and a one-time cost of 287,000 pesos. Five forecasting methods were evaluated using Mean Absolute Deviation. Two inventory models were proposed for the optimization of inventory levels and reorder points. Two alternatives were proposed for the optimization of the delivery scheme. It was determined that using the Linear Trent Projection with Seasonality Adjustment, along with Fixed Time - Fixed Order Quantity model with computed safety stock levels and the use of a 10-wheeler trucks combined with the vans and courier services is best suited for the company. The resulting process, if implemented, will result to (a) decrease in total annual cost of replenishment by 38% (b) reduction of the cost of inventory by 46%, (c) reduction of the holding cost of MRO inventory by 46%, (d) increase of trucking cost by 28%.

Language

English

Location

UPLB Main Library Special Collections Section (USCS)

Call Number

LG 993 2015 E66 /P65

Document Type

Thesis

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